UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K/A
(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 17, 2017

SEMGROUP CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

 
					
Delaware	 	1-34736	 	20-3533152	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
Two Warren Place
6120 S. Yale Avenue, Suite 1500
Tulsa, OK 74136-4231
(Address of Principal Executive Offices) (Zip Code)
(918) 524-8100
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

EXPLANATORY NOTE
On July 17, 2017, SemGroup Corporation (the “Company”) filed with the Securities and Exchange Commission a Current Report on Form 8-K, dated July 17, 2017 (the “Initial Form 8-K”), to report that the Company acquired 100% of the equity interests in Buffalo Parent Gulf Coast Terminals LLC, the parent company of Buffalo Gulf Coast Terminals LLC (“BGCT”) and HFOTCO LLC doing business as Houston Fuel Oil Terminal Company (“HFOTCO”) (the “HFOTCO Acquisition”). This Current Report on Form 8-K/A amends Item 9.01 of the Initial Form 8-K to present certain financial statements of Buffalo Parent Gulf Coast Terminals LLC and to present certain unaudited pro forma financial statements of the Company in connection with the HFOTCO Acquisition.
Item 9.01 Financial Statements and Exhibits.
 
(a)	Financial Statements of Business Acquired.	
Filed as Exhibit 99.2 to this Current Report on Form 8-K/A, and incorporated herein by reference, are audited historical consolidated financial statements of Buffalo Parent Gulf Coast Terminals LLC as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 and unaudited historical consolidated financial statements of Buffalo Parent Gulf Coast Terminals LLC as of June 30, 2017 and for the six months ended June 30, 2017 and 2016.
 
(b)	Pro Forma Financial Information.	
Filed as Exhibit 99.3 to this Current Report on Form 8-K/A, and incorporated herein by reference, are unaudited pro forma condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2017, for the year ended December 31, 2016 and for the six months ended June 30, 2016, which have been prepared to give effect to the HFOTCO Acquisition. These unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent what the Company’s actual results of operations or financial position would have been if the HFOTCO Acquisition had occurred on the dates indicated, nor are they necessarily indicative of the Company’s future operating results or financial position.
 
(d)	Exhibits.	
The following exhibits are filed or furnished herewith.

Exhibit
Number	  	Description	
		
  4.1*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.2*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.3*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
  4.4*	  	Continuing Covenant Agreement, dated as of August 19, 2014, between HFOTCO, as obligor, BGCT, as the parent, Bank of America, N.A., as administrative agent and collateral agent, and the bondholders party thereto.	
		
  4.5*	  	Consent and Amendment to Continuing Covenant Agreement, dated as of June 5, 2017, between HFOTCO, as obligor, BGCT, as the parent, Bank of America, N.A., as administrative agent and collateral agent, and the bondholders party thereto.	
 
2

			
Exhibit
Number	  	Description	
		
  4.6*	  	Loan Agreement, dated as of November 1, 2010, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.7*	  	Loan Agreement, dated as of December 1, 2011, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.8*	  	Loan Agreement, dated as of October 1, 2012, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
  4.9*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.10*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.11*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
10.1*	  	Registration Rights Agreement by and among SemGroup Corporation, Buffalo Investor I, LP and Buffalo Investor II, LP, dated as of July 17, 2017.	
		
10.2*	  	Credit Agreement, dated as of August 19, 2014, among BGCT, as the parent, HFOTCO, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent, Bank of America, N.A., as collateral agent, and the lenders party thereto.	
		
10.3*	  	Consent and Amendment No. 1 to Credit Agreement, dated as of June 14, 2017, among BGCT, as the parent, HFOTCO, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent, Bank of America, N.A., as collateral agent, and the lenders party thereto.	
		
23.1**	  	Consent of BDO USA, LLP.	
		
99.1*	  	Press Release dated July 17, 2017, issued by the Company.	
		
99.2**	  	Historical Consolidated Financial Statements of Buffalo Parent Gulf Coast Terminals LLC.	
		
99.3**	  	Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company.	

*	Previously filed or furnished with the Initial Form 8-K.	
**	Filed with this Current Report on Form 8-K/A.	
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 		 	SEMGROUP CORPORATION	
				
Date: August 31, 2017	 		 	By:	 	/s/ William H. Gault	
	 		 		 	William H. Gault	
	 		 		 	Secretary	
 
3

EXHIBIT INDEX

Exhibit
Number	  	Description	
		
  4.1*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.2*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.3*	  	Amended and Restated Bond Indenture, dated as of August 19, 2014, between Harris County Industrial Development Corporation and The Bank of New York Mellon Trust Company, National Association, as trustee, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
  4.4*	  	Continuing Covenant Agreement, dated as of August 19, 2014, between HFOTCO, as obligor, BGCT, as the parent, Bank of America, N.A., as administrative agent and collateral agent, and the bondholders party thereto.	
		
  4.5*	  	Consent and Amendment to Continuing Covenant Agreement, dated as of June 5, 2017, between HFOTCO, as obligor, BGCT, as the parent, Bank of America, N.A., as administrative agent and collateral agent, and the bondholders party thereto.	
		
  4.6*	  	Loan Agreement, dated as of November 1, 2010, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.7*	  	Loan Agreement, dated as of December 1, 2011, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.8*	  	Loan Agreement, dated as of October 1, 2012, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
  4.9*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $75 million Series 2010 Marine Terminal Revenue Bonds.	
		
  4.10*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $50 million Series 2011 Marine Terminal Revenue Bonds.	
		
  4.11*	  	First Amendment to Loan Agreement, dated as of August 19, 2014, by and between HFOTCO and Harris County Industrial Development Corporation, relating to $100 million Series 2012 Marine Terminal Revenue Bonds.	
		
10.1*	  	Registration Rights Agreement by and among SemGroup Corporation, Buffalo Investor I, LP and Buffalo Investor II, LP, dated as of July 17, 2017.	
		
10.2*	  	Credit Agreement, dated as of August 19, 2014, among BGCT, as the parent, HFOTCO, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent, Bank of America, N.A., as collateral agent, and the lenders party thereto.	
		
10.3*	  	Consent and Amendment No. 1 to Credit Agreement, dated as of June 14, 2017, among BGCT, as the parent, HFOTCO, as the borrower, Morgan Stanley Senior Funding, Inc., as administrative agent, Bank of America, N.A., as collateral agent, and the lenders party thereto.	
		
23.1**	  	Consent of BDO USA, LLP.	
		
99.1*	  	Press Release dated July 17, 2017, issued by the Company.	
		
99.2**	  	Historical Consolidated Financial Statements of Buffalo Parent Gulf Coast Terminals LLC.	
		
99.3**	  	Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company.	

*	Previously filed or furnished with the Initial Form 8-K.	
**	Filed with this Current Report on Form 8-K/A.	
 
4

Exhibit 23.1
Consent of Independent Auditor
The Board of Directors and Shareholders
SemGroup Corporation
Tulsa, Oklahoma
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-210044) and Form S-8 (File Nos. 333-170968, 333-189905 and 333-214561) of SemGroup Corporation (the “Company”) of our report dated April 11, 2017 relating to our audit of the consolidated financial statements of Buffalo Parent Gulf Coast Terminals LLC as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016, included in Exhibit 99.2 to the Company’s Current Report on Form 8-K/A dated August 31, 2017.
/s/ BDO USA, LLP
Houston, Texas
August 31, 2017

 
Exhibit 99.2
Buffalo parent Gulf Coast Terminals LLC
Consolidated Financial Statements
As of December 31, 2016 and 2015 and June 30, 2017, and for each of the Three Years in the Period Ended December 31, 2016, and the Six Months Ended June 30, 2017 and 2016
The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.
BDO

Buffalo Parent Gulf Coast Terminals LLC
Contents

 	  	Page	 	
Independent Auditor’s Report	  	 	3	 	
		
Consolidated Financial Statements	  				
Balance Sheets	  	 	5	 	
Statements of Operations and Comprehensive Income (Loss)	  	 	6	 	
Statements of Changes in Members’ Capital	  	 	7	 	
Statements of Cash Flows	  	 	8	 	
Notes to Consolidated Financial Statements	  	 	9-25	 	
 
2

					
	  	Tel: 713-960-1706
Fax: 713-960-9549
www.bdo.com	    	2929 Allen Parkway, 20th Floor
Houston, Texas 77019-7100	
 Independent Auditor’s Report
To the Members of
Buffalo Parent Gulf Coast Terminals LLC
Houston, Texas
We have audited the accompanying consolidated financial statements of Buffalo Parent Gulf Coast Terminals LLC and its subsidiaries (collectively, the “Company”), which comprise the balance sheets as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income (loss), changes in members’ capital, and cash flows for each of the three years in the period ended December 31, 2016, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Buffalo Parent Gulf Coast Terminals LLC and its subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in accordance with accounting principles generally accepted in the United States of America.
/s/BDO USA, LLP
April 11, 2017
 
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
BDO is the brand name for the BDO network and for each of the BDO Member Firms.
 
3

 
Consolidated Financial Statements

Buffalo Parent Gulf Coast Terminals LLC
 Consolidated Balance Sheets
(in thousands)

 	  	December 31,	 	 	June 30,
2017	 	
 	  	2016	 	 	2015	 	 			
 	  	 	 	 	 	 	 	(Unaudited)	 	
Assets	  				 				 				
				
Current Assets	  				 				 				
Cash and cash equivalents	  	$	3,466	 	 	$	44,698	 	 	$	3,829	 	
Accounts receivable, trade	  	 	10,437	 	 	 	5,650	 	 	 	9,387	 	
Accounts receivable, other	  	 	3,942	 	 	 	323	 	 	 	1,356	 	
Prepaid expenses and other	  	 	1,353	 	 	 	1,120	 	 	 	2,133	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Current Assets	  	 	19,198	 	 	 	51,791	 	 	 	16,705	 	
				
Property, Plant and Equipment, net of accumulated depreciation	  	 	561,865	 	 	 	518,457	 	 	 	613,513	 	
Goodwill	  	 	907,700	 	 	 	907,700	 	 	 	907,700	 	
Intangible Assets, net of accumulated amortization	  	 	20,900	 	 	 	23,026	 	 	 	19,837	 	
Net Investment in Direct Financing Lease	  	 	67,784	 	 	 	65,384	 	 	 	67,825	 	
Other Assets	  	 	8,172	 	 	 	14,765	 	 	 	5,353	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	  	$	1,585,619	 	 	$	1,581,123	 	 	$	1,630,933	 	

Liabilities and Members’ Capital	  				 				 				
				
Current Liabilities	  				 				 				
Accounts payable	  	$	4,484	 	 	$	1,230	 	 	$	8,306	 	
Accrued liabilities	  	 	5,576	 	 	 	5,460	 	 	 	4,407	 	
Accrued property taxes	  	 	5,566	 	 	 	6,120	 	 	 	2,915	 	
Current maturities of long-term debt	  	 	5,500	 	 	 	5,500	 	 	 	5,500	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Current Liabilities	  	 	21,126	 	 	 	18,310	 	 	 	21,128	 	
				
Pension Liability	  	 	10,239	 	 	 	10,835	 	 	 	9,669	 	
Contract Liability, less accumulated amortization	  	 	469	 	 	 	2,974	 	 	 	232	 	
Long-Term Derivative Liability	  	 	3,471	 	 	 	3,960	 	 	 	2,904	 	
Long-Term Debt, less current maturities	  	 	746,593	 	 	 	749,781	 	 	 	744,998	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities	  	 	781,898	 	 	 	785,860	 	 	 	778,931	 	

Commitments and Contingencies (Note 10)	  				 				 				
				
Members’ Capital	  				 				 				
Members’ Capital	  	 	811,502	 	 	 	804,248	 	 	 	858,978	 	
Accumulated other comprehensive loss	  	 	(7,781	) 	 	 	(8,985	) 	 	 	(6,976	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Members’ Capital	  	 	803,721	 	 	 	795,263	 	 	 	852,002	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities and Members’ Capital	  	$	1,585,619	 	 	$	1,581,123	 	 	$	1,630,933	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
5

Buffalo Parent Gulf Coast Terminals LLC
 Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands)

 	  	Year Ended December 31,	 	 	Six Months Ended
June 30,	 	
 	  	2016	 	 	2015	 	 	2014	 	 	2017	 	 	2016	 	
 	  	 	 	 	 	 	 	 	 	 	(Unaudited)	 	 	(Unaudited)	 	
Revenues	  				 				 				 				 				
Storage	  	$	123,519	 	 	$	123,903	 	 	$	116,940	 	 	$	58,736	 	 	$	62,316	 	
Throughput and ancillary services	  	 	19,128	 	 	 	17,288	 	 	 	18,445	 	 	 	12,280	 	 	 	9,827	 	
Direct financing lease income	  	 	12,825	 	 	 	7,443	 	 	 	—  	 	 	 	6,391	 	 	 	6,449	 	
Other	  	 	3,506	 	 	 	238	 	 	 	66	 	 	 	1,913	 	 	 	2,101	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Revenues	  	 	158,978	 	 	 	148,872	 	 	 	135,451	 	 	 	79,320	 	 	 	80,693	 	

Costs and Expenses	  				 				 				 				 				
Operating and maintenance	  	 	31,589	 	 	 	28,525	 	 	 	27,491	 	 	 	16,419	 	 	 	14,789	 	
Selling, general and administrative	  	 	13,373	 	 	 	14,236	 	 	 	12,256	 	 	 	7,509	 	 	 	7,207	 	
Depreciation and amortization	  	 	29,352	 	 	 	28,697	 	 	 	25,769	 	 	 	13,359	 	 	 	14,927	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Costs and Expenses	  	 	74,314	 	 	 	71,458	 	 	 	65,516	 	 	 	37,287	 	 	 	36,923	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from Operations	  	 	84,664	 	 	 	77,414	 	 	 	69,935	 	 	 	42,033	 	 	 	43,770	 	

Other Expense	  				 				 				 				 				
Interest expense	  	 	(31,787	) 	 	 	(36,126	) 	 	 	(31,999	) 	 	 	(14,216	) 	 	 	(20,525	) 	
Loss on early extinguishment of debt	  	 	—  	 	 	 	—  	 	 	 	(50,434	) 	 	 	—  	 	 	 	—  	 	
Other expense, net	  	 	(51	) 	 	 	(325	) 	 	 	(327	) 	 	 	(23	) 	 	 	(26	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Other Expense, net	  	 	(31,838	) 	 	 	(36,451	) 	 	 	(82,760	) 	 	 	(14,239	) 	 	 	(20,551	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (Loss) Before Provision for Income Taxes	  	 	52,826	 	 	 	40,963	 	 	 	(12,825	) 	 	 	27,794	 	 	 	23,219	 	
Provision for Income Taxes	  	 	(572	) 	 	 	(948	) 	 	 	(907	) 	 	 	(318	) 	 	 	(248	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income (Loss)	  	 	52,254	 	 	 	40,015	 	 	 	(13,732	) 	 	 	27,476	 	 	 	22,971	 	
						
Other Comprehensive Income (Loss)	  				 				 				 				 				
Defined benefit pension plan adjustment	  	 	1,204	 	 	 	1,133	 	 	 	(4,225	) 	 	 	805	 	 	 	638	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Comprehensive Income (Loss)	  	$	53,458	 	 	$	41,148	 	 	$	(17,957	) 	 	$	28,281	 	 	$	23,609	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
6

Buffalo Parent Gulf Coast Terminals LLC
 Consolidated Statements of Changes in Members’ Capital
(in thousands)

 	  	Members’
Capital	 	 	Accumulated
Other
Comprehensive
Loss	 	 	Total
Members’
Capital	 	
Balance, January 1, 2014	  	$	773,965	 	 	$	(5,893	) 	 	$	768,072	 	
Net loss	  	 	(13,732	) 	 	 	—  	 	 	 	(13,732	) 	
Contributions	  	 	58,000	 	 	 	—  	 	 	 	58,000	 	
Distributions	  	 	(54,000	) 	 	 	—  	 	 	 	(54,000	) 	
Defined benefit pension plan adjustment	  	 	—  	 	 	 	(4,225	) 	 	 	(4,225	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2014	  	 	764,233	 	 	 	(10,118	) 	 	 	754,115	 	
Net income	  	 	40,015	 	 	 	—  	 	 	 	40,015	 	
Defined benefit pension plan adjustment	  	 	—  	 	 	 	1,133	 	 	 	1,133	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2015	  	 	804,248	 	 	 	(8,985	) 	 	 	795,263	 	
Net income	  	 	52,254	 	 	 	—  	 	 	 	52,254	 	
Distributions	  	 	(45,000	) 	 	 	—  	 	 	 	(45,000	) 	
Defined benefit pension plan adjustment	  	 	—  	 	 	 	1,204	 	 	 	1,204	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2016	  	 	811,502	 	 	 	(7,781	) 	 	 	803,721	 	
Net income (unaudited)	  	 	27,476	 	 	 	—  	 	 	 	27,476	 	
Contributions (unaudited)	  	 	20,000	 	 	 	—  	 	 	 	20,000	 	
Defined benefit pension plan adjustment (unaudited)	  	 	—  	 	 	 	805	 	 	 	805	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Balance, June 30, 2017	  	$	858,978	 	 	$	(6,976	) 	 	$	852,002	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
7

Buffalo Parent Gulf Coast Terminals LLC
 Consolidated Statements of Cash Flows
(in thousands)

 	  	Year Ended December 31,	 	 	Six Months Ended
June 30,	 	
 	  	2016	 	 	2015	 	 	2014	 	 	2017	 	 	2016	 	
 	  	 	 	 	 	 	 	 	 	 	(Unaudited)	 	 	(Unaudited)	 	
Cash Flows From Operating Activities	  				 				 				 				 				
Net income (loss)	  	$	52,254	 	 	$	40,015	 	 	$	(13,732	) 	 	$	27,476	 	 	$	22,971	 	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	  				 				 				 				 				
Amortization of contract liability	  	 	(2,505	) 	 	 	(4,702	) 	 	 	(7,544	) 	 	 	(237	) 	 	 	(1,645	) 	
Depreciation and amortization	  	 	29,352	 	 	 	28,697	 	 	 	25,769	 	 	 	13,359	 	 	 	14,927	 	
Amortization of debt discount and	  				 				 				 				 				
deferred financing costs	  	 	2,403	 	 	 	2,399	 	 	 	2,832	 	 	 	1,200	 	 	 	1,202	 	
Loss on disposal of fixed assets	  	 	—  	 	 	 	188	 	 	 	211	 	 	 	632	 	 	 	—  	 	
Loss on early extinguishment of debt	  	 	—  	 	 	 	—  	 	 	 	50,434	 	 	 	—  	 	 	 	—  	 	
Net periodic pension fund costs	  	 	1,612	 	 	 	1,642	 	 	 	980	 	 	 	690	 	 	 	806	 	
Loss/(gain) on interest rate swaps	  	 	236	 	 	 	4,943	 	 	 	1,156	 	 	 	(1,394	) 	 	 	5,233	 	
Changes in operating assets and liabilities:	  				 				 				 				 				
Accounts receivable, trade	  	 	(4,787	) 	 	 	1,345	 	 	 	(311	) 	 	 	1,050	 	 	 	(551	) 	
Accounts receivable, other	  	 	(3,619	) 	 	 	(258	) 	 	 	941	 	 	 	2,586	 	 	 	(1,053	) 	
Prepaid expenses and other	  	 	(233	) 	 	 	539	 	 	 	(1,928	) 	 	 	(780	) 	 	 	(1,217	) 	
Other assets	  	 	(1,766	) 	 	 	(1,491	) 	 	 	14	 	 	 	(837	) 	 	 	(400	) 	
Accounts payable	  	 	1,332	 	 	 	(370	) 	 	 	(677	) 	 	 	(1,865	) 	 	 	(77	) 	
Accrued liabilities	  	 	(1,613	) 	 	 	(263	) 	 	 	(593	) 	 	 	(797	) 	 	 	(2,838	) 	
Accrued property taxes	  	 	(554	) 	 	 	794	 	 	 	424	 	 	 	(2,651	) 	 	 	(2,778	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided By Operating Activities	  	 	72,112	 	 	 	73,478	 	 	 	57,976	 	 	 	38,432	 	 	 	34,580	 	

Cash Flows From Investing Activities	  				 				 				 				 				
Expenditures for property, plant and equipment	  	 	(59,618	) 	 	 	(69,270	) 	 	 	(54,032	) 	 	 	(55,278	) 	 	 	(31,216	) 	
Other assets	  	 	(826	) 	 	 	(7,491	) 	 	 	(7,800	) 	 	 	—  	 	 	 	—  	 	
Net investment in direct finance lease	  	 	(2,400	) 	 	 	—  	 	 	 	—  	 	 	 	(41	) 	 	 	(1,370	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Used In Investing Activities	  	 	(62,844	) 	 	 	(76,761	) 	 	 	(61,832	) 	 	 	(55,319	) 	 	 	(32,586	) 	

Cash Flows from Financing Activities	  				 				 				 				 				
Repayments on long-term debt	  	 	(5,500	) 	 	 	(5,500	) 	 	 	(459,542	) 	 	 	(2,750	) 	 	 	(2,750	) 	
Proceeds from long-term debt	  	 	—  	 	 	 	—  	 	 	 	547,250	 	 	 	—  	 	 	 	—  	 	
Penalty on early extinguishment of debt and fees	  	 	—  	 	 	 	—  	 	 	 	(39,548	) 	 	 	—  	 	 	 	—  	 	
Debt financing costs	  	 	—  	 	 	 	(47	) 	 	 	(11,149	) 	 	 	—  	 	 	 	—  	 	
Repayments of line of credit	  	 	—  	 	 	 	—  	 	 	 	(12,750	) 	 	 	—  	 	 	 	—  	 	
Restricted cash	  	 	—  	 	 	 	—  	 	 	 	14,572	 	 	 	—  	 	 	 	—  	 	
Contributions	  	 	—  	 	 	 	—  	 	 	 	58,000	 	 	 	20,000	 	 	 	—  	 	
Distributions	  	 	(45,000	) 	 	 	—  	 	 	 	(54,000	) 	 	 	—  	 	 	 	(25,000	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Cash Provided By (Used In) Financing Activities	  	 	(50,500	) 	 	 	(5,547	) 	 	 	42,833	 	 	 	17,250	 	 	 	(27,750	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Increase (Decrease) in Cash and Cash Equivalents	  	 	(41,232	) 	 	 	(8,830	) 	 	 	38,977	 	 	 	363	 	 	 	(25,756	) 	
Cash and Cash Equivalents—Beginning of Year	  	 	44,698	 	 	 	53,528	 	 	 	14,551	 	 	 	3,466	 	 	 	44,698	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents—End of Year	  	$	3,466	 	 	$	44,698	 	 	$	53,528	 	 	$	3,829	 	 	$	18,942	 	

Supplemental Cash Flow Information	  				 				 				 				 				
Cash paid for interest, net of amounts capitalized	  	$	28,586	 	 	$	28,689	 	 	$	32,260	 	 	$	14,212	 	 	$	13,947	 	

Non-Cash Investing and Financing Activities	  				 				 				 				 				
Transfer of assets from property, plant and equipment to net investment in direct financing lease	  	$	—	 	 	$	65,384	 	 	$	—	 	 	$	—	 	 	$	—	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Transfer of assets from other assets to property, plant and equipment	  	$	7,267	 	 	$	2,962	 	 	$	—	 	 	$	2,710	 	 	$	1,422	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable for construction in progress	  	$	2,204	 	 	$	282	 	 	$	6,582	 	 	$	7,891	 	 	$	1,243	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Defined benefit pension plan adjustments	  	$	1,204	 	 	$	1,133	 	 	$	(4,225	) 	 	$	805	 	 	$	638	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to consolidated financial statements.
 
8

Buffalo Parent Gulf Coast Terminals LLC
 Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
1. Organization and Nature of Business
Buffalo Parent Gulf Coast Terminals LLC (the “Company”), a Texas limited liability company, was formed on October 31, 2011 to acquire 100% interest in Buffalo Gulf Coast Terminals LLC. Buffalo Gulf Coast Terminals LLC holds 100% interest in HFOTCO LLC and is located in Houston, Texas. The Company, through its subsidiaries, is engaged in the terminaling, storage and transportation of residual fuel oil and crude oil on the Houston Ship Channel.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Buffalo Gulf Coast Terminals LLC and HFOTCO LLC. All intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
The Company provides integrated storage, throughput and ancillary services for residual fuel oil and crude oil. The Company’s customers are primarily integrated oil companies, refiners, bunker fuel marketers and trading firms. The Company generates revenues through the provision of fee based services to its customers under a combination of multi-year and month-to-month agreements. The agreements contain “take-or-pay” provisions whereby the Company is entitled to a minimum storage or throughput fee. The Company recognizes revenues when the service is provided, the residual fuel oil and crude oil are handled or when the customer’s ability to make up the minimum volume has expired, in accordance with the terms of the contracts.
In May 2014, the Company simultaneously entered into two long-term integrated storage and throughput agreements with a customer that were determined to be a direct financing lease. For the direct financing lease, the Company records the gross lease receivable, the estimated residual value of the leased assets, initial direct cost incurred less the unearned lease income as net investment in direct financing lease. Unearned lease income is the amount by which the gross lease receivable plus the estimated residual value exceeds the costs of the assets. Unearned lease income and initial direct costs incurred are amortized over the related lease term using the interest method. Amortization of unearned lease income and initial direct costs is suspended if, in the Company’s opinion, full payment of the contractual amount due under the agreements are doubtful.
Cash and Cash Equivalents
The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are customer obligations due under agreed-upon trade terms. The Company provides terminaling, storage and throughput of residual fuel oil and crude oil to customers primarily in the fuel oil, petroleum and related service industries. The Company performs continuing credit evaluations of its customers and generally does not require collateral.
 
9

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The Company’s management reviews accounts receivable on a monthly basis to determine if any receivables could potentially be uncollectible, and if so, includes a determined amount in its allowance for doubtful accounts. Based on the information available to the Company, management determined that no allowance for doubtful accounts was needed at December 31, 2016 and 2015. However, actual write-offs may occur.
Property, Plant, and Equipment
Property, plant and equipment acquired in connection with the acquisition of the Company was recorded at fair value as of the date of the acquisition and depreciated using the straight-line method over the remaining estimated useful lives. All other additions are recorded at cost, and depreciation is recognized using the straight-line method over the estimated useful lives. The following is a summary of the estimated useful lives.

 	  	Estimated
Useful Lives	 	
Buildings	  	 	20 years	 	
Tools and equipment	  	 	2-5 years	 	
Furniture and fixtures	  	 	3-5 years	 	
Vehicles	  	 	5 years	 	
Steam and electrical systems	  	 	10 years	 	
Operating equipment	  	 	20 years	 	
Tanks, docks, pipelines, roads, valves and surface improvements	  	 	20-40 years	 	
The Company capitalizes all direct and indirect construction costs and related interest. Indirect construction costs include general engineering, taxes and the cost of funds used during construction. Costs, including complete asset replacements and enhancements or upgrades that increase the original efficiency, productivity or capacity of property, plant and equipment, are also capitalized. The costs of repairs, minor replacements and maintenance projects which do not increase the original efficiency, productivity or capacity of property, plant and equipment, are expensed as incurred.
Impairment of Long-Lived Assets
Long-lived assets to be held and used by the Company are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted cash flows. In management’s opinion, there was no impairment of such assets for the years ended December 31, 2016, 2015 and 2014.
 
10

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
Goodwill and Other Intangible Assets
Goodwill was $907.7 million at December 31, 2016 and 2015 and represents the excess of the purchase price of the Company over the fair value of net assets acquired as of acquisition date. The Company tests goodwill for impairment annually or at any other time when impairment indicators exist. Examples of such indicators, which would cause the Company to test goodwill for impairment between annual tests, include a significant change in business climate, significant unexpected competition and significant deterioration in market share.
Fair value is estimated by the Company using discounted cash flows and other market related valuation models, including earnings multiples and comparable asset market values. If circumstances change or events occur to indicate that the Company’s fair market value has fallen below book value, the Company will compare the estimated fair value of goodwill to its book value. If the book value of goodwill exceeds the estimated fair value of goodwill, the Company will recognize the difference as an impairment loss in the consolidated statement of operations and comprehensive income (loss). For the years ended December 31, 2016, 2015 and 2014, there was no impairment to the recorded value of goodwill.
The Company’s identifiable intangible asset is customer relationships and is amortized over fifteen years using the straight-line method. At December 31, 2016 and 2015, the customer relationships were $31.9 million and $31.9 million, respectively, and accumulated amortization was $11.0 million and $8.9 million, respectively. Amortization expense was $2.1 million for each of the years ended December 31, 2016, 2015 and 2014. Annual amortization expense is expected to be $2.1 million through 2025 and $2.0 million in 2026.
Recently Adopted Accounting Guidance
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, in August 2015, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements , which clarifies ASU No. 2015-03 by stating that the staff of the SEC would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. ASU 2015-03 and ASU 2015-15 are effective for periods beginning after December 15, 2015 and early adoption is permitted. The Company adopted these ASUs in the year ended December 31, 2016 and applied them retrospectively to the December 31, 2015 balances which resulted in $8.5 million deferred finance cost, previously presented as an asset in the balance sheet, being presented as a deduction from the long-term debt in the December 31, 2015 balance sheet.
 
11

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
Deferred Financing Costs
Deferred financing costs represent costs incurred by the Company to obtain its debt financing. Deferred financing costs are amortized over the lives of the associated financing using the effective interest rate method. At December 31, 2016 and 2015, deferred financing costs, related to the Company’s revolving credit facility, presented as part of other assets amounted to $242,000 and $333,000, respectively, and amortization expense totaled $91,000, $91,000 and $429,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Deferred financing costs presented as a deduction from the long-term debt at December 31, 2016 and 2015 totaled $7.0 million and $8.5 million, respectively, and amortization expense totaled $1.5 million, $1.5 million and $1.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Amortization of deferred finance cost is included in interest expense in the consolidated statements of operations and comprehensive income (loss).
Defined Benefit Pension Plan
The Company sponsors a defined benefit pension plan for its employees. The defined benefit pension plan requires actuarial assumptions to estimate the projected and accumulated benefit obligations, including the following variables: discount rate, expected salary increases, certain employee-related factors such as turnover, retirement age and mortality, and expected return of assets. These and other actuarial assumptions affect the annual expense and obligation that are recognized for the underlying plan. These assumptions reflect the Company’s historical experiences and management’s best judgment with regards to future expectations. The actuarial assumptions that are used may differ from actual results due to changing market rates or other factors. These differences could impact the amount of pension expense and liability recorded.
Income Taxes
The Company does not pay federal income tax on its taxable income. Instead, members of its parent company are liable for federal income tax on their respective shares of the Company’s taxable income reported on their federal income tax returns.
The Company is subject to a tax imposed by the State of Texas. The tax is a 0.75% tax that is levied on taxable margin. Taxable margin is defined as total revenue less deductions for cost of goods sold or compensation and benefits in which the total calculated taxable margin cannot exceed 70% of total revenue.
The Company accounts for uncertainty in income taxes in accordance with guidance within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740-10, Uncertain Tax Positions . The guidance requires the impact of a tax position to be recognized in the financial statements only if that position is more likely than not of being sustained upon examination by the taxing authority. The Company has not recognized any liabilities in the accompanying consolidated financial statements for uncertain tax positions. The Company’s tax years from 2012 are open for examination. Any penalties or interest assessed as the result of an examination will be passed through to the Company’s members.
 
12

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade receivables. Cash and cash equivalents are held on deposit with major banks. Management of the Company believes that the financial institutions holding these amounts are financially sound and, accordingly, minimal credit risk exists with respect to these assets. The Company maintains cash and cash equivalents at financial institutions for which the combined account balances in individual institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a credit risk related to amounts on deposit in excess of FDIC coverage. The Company has not experienced any losses in such accounts, and management of the Company believes that the financial institutions holding these amounts are financially sound and, accordingly, minimal credit risk exists with respect to these assets.
The Company extends credit to its customers primarily in the fuel oil, petroleum and related service industries. Customer concentration may impact the overall exposure to credit risk, either positively or negatively, in that the customer may be similarly affected by the changes in the economy or other conditions. For the year ended December 31, 2016, the Company had one customer that represented 11% of total revenues and 12% of accounts receivable at December 31, 2016, and represented 11% and 10% of total revenues for the six months ended June 30, 2017 and 2016, respectively, and 1% of accounts receivable at June 30, 2017.
Fair Value of Financial Instruments
FASB ASC Topic 820, Fair Value Measurements and Disclosures establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. Generally accepted accounting principles defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorized assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement.
The three levels are defined as follows:
Level 1 - Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active; or other inputs which are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.
 
13

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The Company’s fair value of financial instruments disclosure is based upon information available to management as of December 31, 2016 and 2015. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The Company’s financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and interest rate swaps. The carrying value for cash and cash equivalents, accounts receivable and accounts payable approximates their fair value, principally due to the short term maturities of these instruments. The carrying value for the long-term debt approximates fair values because the interest rates are similar to other financial instruments with similar credit risks and terms.
The Company follows the provisions of FASB ASC Topic 815, Derivatives and Hedging , for its interest rate swaps which require all derivative instruments be recorded at fair value. The Company does not specifically designate interest rate swaps as cash flow hedges, even though they reduce its exposure to changes in interest rates of senior term notes and tax-exempt notes payable. Therefore, the Company records the change in the fair market values of interest rate swaps in the consolidated statement of operations and comprehensive income (loss). The Company has classified such fair value measurements as level 2 and determines fair value primarily by third party valuations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company’s estimates and assumptions are based on historical experience and on various other assumptions and information that the Company’s management believes to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While management believes that the estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.
Reclassifications
Certain amounts for the years ended December 31, 2015 and 2014 have been reclassified to conform to the 2016 financial statement presentation.
Unaudited Interim Condensed Consolidated Financial Statements
In the opinion of the Company’s management, the unaudited condensed consolidated balance sheet as of June 30, 2017, the unaudited condensed consolidated statements of operations and comprehensive income (loss) and cash flows for the six months ended June 30, 2017 and 2016, and the unaudited condensed consolidated statement of changes in members’ capital for the six months ended June 30, 2017, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year.
 
14

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
3. Accounts Receivable – Other
Accounts receivable – other consists of the following (in thousands) :

 	  	December 31,	 	
 	  	2016	 	  	2015	 	
Insurance claim receivable	  	$	3,560	 	  	$	195	 	
Other	  	 	382	 	  	 	128	 	
	  	 	 	 	  	 	 	 	
Accounts receivable—other	  	$	3,942	 	  	$	323	 	
	  	 	 	 	  	 	 	 	
4. Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands) :

December 31,	  	2016	 	  	2015	 	
Land	  	$	33,124	 	  	$	33,124	 	
Buildings	  	 	3,258	 	  	 	2,824	 	
Tools and equipment	  	 	746	 	  	 	647	 	
Furniture and fixtures	  	 	2,515	 	  	 	2,192	 	
Vehicles	  	 	1,134	 	  	 	976	 	
Steam and electrical systems	  	 	29,682	 	  	 	27,905	 	
Operating equipment	  	 	22,291	 	  	 	21,823	 	
Tanks, docks, pipelines, roads, valves and surface improvements	  	 	538,537	 	  	 	490,133	 	
Capital projects in progress	  	 	48,508	 	  	 	31,364	 	
	  	 	 	 	  	 	 	 	
	  	 	679,795	 	  	 	610,988	 	
Less: accumulated depreciation	  	 	(117,930	) 	  	 	(92,531	) 	
	  	 	 	 	  	 	 	 	
Property and equipment, net	  	$	561,865	 	  	$	518,457	 	
	  	 	 	 	  	 	 	 	
Depreciation expense was $25.4 million, $25.6 million and $23.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. Interest costs capitalized as part of the costs of construction were $1.5 million, $1.1 million and $365,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
 
15

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
5. Net Investment in Direct Financing Leases
On May 5, 2014, the Company simultaneously entered into two long-term integrated storage and throughput agreements with a customer that were determined to be a direct financing lease. The costs of the land, tanks and barge dock associated with the direct financing leases totaled $65.4 million at December 31, 2015. These were accounted for in property, plant and equipment until commencement of the agreements in June 2015, at which time such costs were transferred to net investment in direct financing lease. The ownership of the assets associated with the direct financing lease do not transfer to the customer at the end of the 10 year lease term. During 2016, an additional $2.4 million was incurred to complete the assets. The non-guaranteed estimated residual values of the assets associated with the agreement were determined by an independent valuation.
Minimum monthly payments in accordance with these agreements total approximately $1.1 million for the years ended December 31, 2016 and 2015, with an annual cost of living escalation pertaining to the land lease, as defined by the agreement.
The following table lists the components of the net investment in direct financing leases ( in thousands ):

December 31,	  	2016	 	  	2015	 	
Total minimum lease payments to be received	  	$	108,102	 	  	$	120,927	 	
Estimated residual values of leased property (non-guaranteed)	  	 	67,784	 	  	 	65,384	 	
Less: unearned income	  	 	(108,102	) 	  	 	(120,927	) 	
	  	 	 	 	  	 	 	 	
Net investment in direct financing leases	  	$	67,784	 	  	$	65,384	 	
	  	 	 	 	  	 	 	 	
At December 31, 2016, minimum lease payments to be received for each of the five succeeding fiscal years and thereafter are as follows ( in thousands ):

Year Ending December 31,	  	 	 	
2017	  	$	12,829	 	
2018	  	 	12,833	 	
2019	  	 	12,837	 	
2020	  	 	12,841	 	
2021	  	 	12,843	 	
Thereafter	  	 	43,919	 	
	  	 	 	 	
	  	$	108,102	 	

16

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
6. Revolving Credit Facility and Long-Term Debt
The Company has a revolving credit facility with a syndicate of banks. The credit facility provides for borrowings up to $75 million, including letters of credit, and matures August 19, 2019. Borrowings under the credit facility bear interest at a margin over LIBOR with a floor on the LIBOR rate, as defined by the agreement, with the margin being 3.25% and the floor being 1.0%. The revolving credit facility is secured by substantially all assets of the Company and the Company’s equity interest in HFOTCO LLC. At December 31, 2016 and 2015, and June 30, 2017, there were no borrowings outstanding under the revolving credit facility.
The revolving credit facility contains certain covenants which included, among other things, certain financial ratios, limitations on encumbrance and sale of Company assets and distributions, as defined by the agreement. Certain covenants, primarily the financial ratios, are not triggered until borrowings under the revolving credit facility exceed a threshold, as defined by the agreement. At December 31, 2016 and 2015, and June 30, 2017, the Company was in compliance with the covenants.
Long-term debt consists of the following ( in thousands ):

December 31,	  	2016	 	 	2015	 	
Senior secured term B note payable due in quarterly installments of $1,375, with a final payment due August 19, 2021 and quarterly interest (4.25% as of December 31, 2016) throughout the term of the loan, less debt discount of $3,526 and $4,296, respectively, and less deferred financing cost of $7,006 and $8,548, respectively.	  	$	527,093	 	 	$	530,281	 	
			
Note payable with a final payment of $75,000 on November 1, 2050 with monthly interest payments linked to LIBOR plus a margin tied to the leverage ratio.	  	 	75,000	 	 	 	75,000	 	
			
Note payable with a final payment of $50,000 on November 1, 2050 with monthly interest payments linked to LIBOR plus a margin tied to the leverage ratio.	  	 	50,000	 	 	 	50,000	 	
			
 Note payable with a final payment of $100,000 on November 1, 2050 with monthly interest payments linked to LIBOR plus a margin tied to the leverage ratio.	  	 	100,000	 	 	 	100,000	 	
	  	 	 	 	 	 	 	 	
	  	 	752,093	 	 	 	755,281	 	
Less: current maturities	  	 	(5,500	) 	 	 	(5,500	) 	
	  	 	 	 	 	 	 	 	
Total long-term debt, less current maturities	  	$	746,593	 	 	$	749,781	 	

17

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The Company had a $550 million senior secured term B loan agreement with a syndicate of banks. Borrowings under the term loan agreement bear interest at a margin over LIBOR with a floor on the LIBOR rate, as defined by the agreement, with the margin being 3.25% and the floor being 1.0%. The term loan is secured by substantially all assets of the Company and the Company’s equity interest in HFOTCO LLC.
The term loan agreement contains certain covenants which include, among other things, certain financial ratios, limitations on encumbrance and sale of Company assets and distributions, as defined by the agreement. Certain covenants, primarily the financial ratios, are not triggered until borrowings under the revolving credit facility exceed a threshold, as defined by the agreement. At December 31, 2016 and 2015, and June 30, 2017, the Company was in compliance with the covenants.
The Company had $225 million of tax-exempt notes payable held by three institutions. Interest rates at December 31, 2016 were 1.83%. The tax-exempt notes payable are secured by substantially all assets of the Company and the Company’s equity interest in HFOTCO LLC and has a priority position over the revolving credit facility and the senior secured term B loan agreement. The tax-exempt notes payable contain certain covenants which include, among other things, certain financial ratios, limitations on encumbrances and sale of Company assets and distributions, as defined by the agreement. At December 31, 2016 and 2015, and June 30, 2017, the Company was in compliance with these covenants.
Aggregate maturities of long-term debt, excluding debt discounts and deferred financing costs, as of December 31, 2016, are as follows (in thousands) :

Year Ending December 31,	  	 	 	
2017	  	$	5,500	 	
2018	  	 	5,500	 	
2019	  	 	5,500	 	
2020	  	 	5,500	 	
2021	  	 	5,500	 	
Thereafter	  	 	735,125	 	
	  	 	 	 	
	  	$	762,625	 	
	  	 	 	 	
In August 2014, the Company entered into a new financing agreement with a syndicate of banks to refinance the Company’s existing revolving line of credit, senior secured notes and unsecured senior note at that time.
The refinancing was primarily treated as an extinguishment of debt, except for certain senior secured note holders that elected to participate in the refinancing. In association with the refinancing, the Company recorded a loss on early extinguishment of debt of approximately $50.4 million, which is comprised of debt breakage fees of approximately $36.9 million, other fees of approximately $2.6 million, write-off of deferred financing costs and original issued discounts of approximately $6.5 million and $4.4 million, respectively.
 
18

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
7. Employee Benefit Plans
The Company has a qualified, noncontributory, defined-benefit retirement plan covering substantially all employees. The benefits of the plan are based primarily on years of service and the average annual compensation of an employee during three consecutive years of highest earnings during their last ten years of service. The Company’s funding policy is to contribute within the range of minimum required contributions and the maximum deductible amount within the time allowed for the Company to deduct the contributions for tax purposes. The Company uses a December 31 measurement date for this plan. The Company also has a nonqualified, noncontributory, defined-benefit supplemental retirement plan covering a former key executive, which is included in the plan disclosures below.
The changes in the plan benefit obligation, plan assets and the net periodic pension costs, respectively, during 2016 and 2015 are as follows ( in thousands ):

December 31,	  	2016	 	  	2015	 	
Change in benefit obligation	  				  				
Projected benefit obligation at beginning of year	  	$	23,926	 	  	$	23,942	 	
Service cost	  	 	931	 	  	 	1,033	 	
Interest cost	  	 	1,016	 	  	 	947	 	
Actuarial gain	  	 	(404	) 	  	 	(1,596	) 	
Benefits paid	  	 	(452	) 	  	 	(400	) 	
	  	 	 	 	  	 	 	 	
Projected benefit obligation at end of year	  	 	25,017	 	  	 	23,926	 	
	  	 	 	 	  	 	 	 	
Change in plan assets	  				  				
Fair value of plan assets at beginning of year	  	 	13,091	 	  	 	12,748	 	
Employer contribution	  	 	1,004	 	  	 	868	 	
Actual return on plan assets	  	 	1,135	 	  	 	(125	) 	
Benefits paid	  	 	(452	) 	  	 	(400	) 	
	  	 	 	 	  	 	 	 	
Fair value of plan assets at end of year	  	 	14,778	 	  	 	13,091	 	
	  	 	 	 	  	 	 	 	
Net funded status	  	$	10,239	 	  	$	10,835	 	
	  	 	 	 	  	 	 	 	
Net periodic pension cost	  				  				
Service cost	  	$	931	 	  	$	1,033	 	
Interest cost	  	 	1,016	 	  	 	947	 	
Expected return on plan assets	  	 	(863	) 	  	 	(964	) 	
Prior service cost	  	 	12	 	  	 	12	 	
Recognized loss	  	 	516	 	  	 	614	 	
	  	 	 	 	  	 	 	 	
Total	  	$	1,612	 	  	$	1,642	 	

19

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The plan is under funded by $10.2 million and $10.8 million as of December 31, 2016 and 2015, respectively, which is shown as pension liability on the consolidated balance sheets.
The pension costs for the years ended December 31, 2016, 2015 and 2014 amounted to $1.6 million, $1.6 million and $1.0 million, respectively, and were recorded as part of operating costs and selling, general and administrative expenses allocated between the expense categories in relation to the labor costs.
Assumptions used in the determination of the Company’s pension accounting are as follows:

December 31,	  	2016	 	 	2015	 	 	2014	 	
Discount rate	  	 	4.3	% 	 	 	4.0	% 	 	 	4.0	% 	
Average compensation growth	  	 	3.5	% 	 	 	3.5	% 	 	 	3.5	% 	
Expected return on plan assets	  	 	6.5	% 	 	 	8.0	% 	 	 	8.0	% 	
Net periodic benefit costs, the Company contributions, and benefits paid, were as follows (in thousands) :

Year Ended December 31,	  	2016	 	  	2015	 	  	2014	 	
Net periodic benefit costs	  	$	1,612	 	  	$	1,642	 	  	$	980	 	
Contributions	  	 	1,004	 	  	 	868	 	  	 	1,174	 	
Benefits paid	  	 	(452	) 	  	 	(400	) 	  	 	355	 	
The Company’s assumption on expected long-term return on plan assets is based on a periodic review and modeling of the plan’s asset allocation and liability structure over a long-term period. The expected long-term rate of return on plan assets was selected from within the reasonable range of rates as determined by (1) historical real returns, net of inflation, and (2) projections of inflation over the long-term period during which benefits are payable to plan participants. Accumulated other comprehensive loss is comprised of the following (in thousands):

Year Ended December 31,	  	2016	 	  	2015	 	
Net loss	  	$	(7,749	) 	  	$	(8,941	) 	
Unrecognized prior service costs	  	 	(32	) 	  	 	(44	) 	
	  	 	 	 	  	 	 	 	
	  	$	(7,781	) 	  	$	(8,985	) 	

20

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit costs for 2017 is as follows (in thousands) :

December 31,	  	Amount	 	
Net loss	  	$	(415	) 	
Unrecognized prior service costs	  	 	(11	) 	
	  	 	 	 	
	  	$	(426	) 	
	  	 	 	 	
Plan Assets and Investment Strategy
The following table sets forth the composition of the pension plan assets (in thousands) :

December 31,	  	2016	 	  	2015	 	
Investments	  				  				
Mutual funds	  	$	14,234	 	  	$	12,654	 	
Cash balances	  	 	544	 	  	 	437	 	
	  	 	 	 	  	 	 	 	
	  	$	14,778	 	  	$	13,091	 	
	  	 	 	 	  	 	 	 	
During 2016 and 2015, the pension plan assets were invested in various mutual funds. The fair values of these investments are determined by quoted prices in active markets.
In accordance with FASB ASC 820, Fair Value Measurements and Disclosures, the mutual funds are classified as Level 1.
For the years ended December 31, 2016, 2015 and 2014, the actual return on pension plan assets amounted to a gain of $1,135,000, a loss of $125,000, and a gain of $793,000, respectively.
The Company’s investment strategy on its pension plan assets is designed to ensure that assets are invested in a manner necessary to meet expected future benefits that will be earned by plan participants. This strategy is periodically reviewed by the Company and the plan’s third-party administrator, and is established and administered in a manner that is compliant at all times with applicable government regulations.
Contributions and Benefit Payments
The Company expects to contribute the maximum amount that is allowed by law to its pension plan in 2017, which is estimated to be $1.1 million.
Contributions vary as a result of changes to investment performance, actuarial assumptions and the investment portfolio mix.
Contributions were approximately $1,004,000, $868,000 and $1,200,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
 
21

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The plan made benefit payments of approximately $452,000, $400,000 and $355,000 for the years ended December 31, 2016, 2015 and 2014, respectively. The following table shows the expected benefit payments for the plan for the next ten years ( in thousands ):

Year Ending December 31,	  	 	 	
2017	  	$	627	 	
2018	  	 	737	 	
2019	  	 	793	 	
2020	  	 	946	 	
2021	  	 	1,052	 	
Thereafter (2022 - 2026)	  	 	6,433	 	
	  	 	 	 	
	  	$	10,588	 	
	  	 	 	 	
The Company has an accumulated benefit obligation in excess of plan assets, accordingly, the following should be considered (in thousands) :

Year Ended December 31,	  	2016	 	  	2015	 	
Projected benefit obligations	  	$	25,017	 	  	$	23,926	 	
Accumulated benefit obligations	  	 	22,202	 	  	 	20,911	 	
Fair value of plan assets	  	 	14,778	 	  	 	13,091	 	
401(k) Benefit Plan
The Company also offers a 401(k) plan for the benefit of substantially all employees. The 401(k) plan provides for partial matching of contributions made by participating employees, as well as a profit-sharing provision, as determined at year-end by the member, allocated based on a participant’s compensation in excess of the taxable wage base. The Company contributed $353,000, $308,000 and $316,000 of matching contributions for the years ended December 31, 2016, 2015 and 2014, respectively. The Company also accrued $545,000, $517,000 and $523,000 for the profit sharing provision for the years ended December 31, 2016, 2015 and 2014, respectively.
8. Interest Rate Derivative Transactions
In accordance with the Company’s debt agreements, the Company entered into interest rate risk management transactions in the form of interest rate swaps for a portion of its outstanding debt balance. These transactions allow the Company to reduce exposure to interest rate fluctuations. While the use of these arrangements limits the Company’s ability to benefit from decreases in interest rates, it also reduces the Company’s potential exposure to increases in interest rates. The Company’s arrangements, to the extent it enters into any, apply to only a portion of its outstanding debt balance, provide only partial protection against interest rate increases and limit the Company’s potential savings from future interest rate declines. It is never management’s intention to hold or
 
22

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
issue derivative instruments for speculative trading purpose. The Company does not designate these interest rate swaps as cash flow hedges, even though they reduce its exposure to changes in interest rates. Therefore, the mark-to-market of these instruments is recorded in current earnings and included in interest expense. The Company uses readily available money market rates and interest swap market data to estimate the fair value of the interest rate swaps. The total impact on interest expense from the mark-to-market and settlements for the years ended December 31 was as follows ( in thousands ):

Year Ended December 31,	  	2016	 	  	2015	 	
Beginning fair value of interest rate swaps	  	$	(4,261	) 	  	$	682	 	
Total loss on interest rate swaps	  	 	(2,969	) 	  	 	(7,198	) 	
Cash settlement paid	  	 	2,733	 	  	 	2,255	 	
	  	 	 	 	  	 	 	 	
	  	 	(4,497	) 	  	 	(4,261	) 	
Less: current maturities	  	 	1,026	 	  	 	301	 	
	  	 	 	 	  	 	 	 	
Ending fair value of interest rate swaps	  	$	(3,471	) 	  	$	(3,960	) 	
	  	 	 	 	  	 	 	 	
The current maturities of the interest rate swaps at December 31, 2016 and 2015, are included in accrued liabilities in the accompanying consolidated balance sheets.
The table below summarizes the interest rate swap liabilities as of December 31, 2016 ( in thousands ):

Notional Amount	 	Fixed Rate	 	Effective Date	 	Maturity	 	Estimated Fair Market Value
at December 31, 2016	
100 Million	 	1.70%	 	10/16/2014	 	8/20/2018	 	$(531)	
100 Million	 	1.66%	 	10/16/2014	 	8/20/2018	 	(467)	
37.5 Million	 	1.66%	 	10/16/2014	 	8/20/2018	 	(171)	
37.5 Million	 	1.70%	 	10/16/2014	 	8/20/2018	 	(200)	
100 Million	 	1.17%	 	10/3/2016	 	10/1/2017	 	(469)	
100 Million	 	1.59%	 	10/2/2017	 	10/1/2018	 	(565)	
100 Million	 	1.81%	 	10/1/2018	 	8/19/2019	 	(406)	
62.5 Million	 	1.14%	 	10/3/2016	 	10/2/2017	 	(279)	
62.5 Million	 	1.57%	 	10/2/2017	 	10/1/2018	 	(339)	
62.5 Million	 	1.79%	 	10/1/2018	 	8/19/2019	 	(243)	
62.5 Million	 	1.14%	 	10/3/2016	 	10/2/2017	 	(278)	
62.5 Million	 	1.53%	 	10/2/2017	 	10/1/2018	 	(318)	
62.5 Million	 	1.76%	 	10/1/2018	 	8/19/2019	 	(231)	
	 		 		 		 	 	
	 		 		 		 	$(4,497)	

23

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The table below summarizes the interest rate swap assets (liabilities) as of December 31, 2015 (in thousands):

Notional Amount	 	Fixed Rate	 	Effective Date	 	Maturity	 	Estimated Fair Market Value
at December 31, 2015	
$100 million	 	1.70%	 	10/16/14	 	8/20/18	 	$(603)	
$100 million	 	1.66%	 	10/16/14	 	8/20/18	 	(506)	
$37.5 million	 	1.66%	 	10/16/14	 	8/20/18	 	(182)	
$37.5 million	 	1.70%	 	10/16/14	 	8/20/18	 	(227)	
$100 million	 	0.62%	 	10/1/15	 	10/1/16	 	(146)	
$100 million	 	1.17%	 	10/3/16	 	10/1/17	 	(349)	
$100 million	 	1.59%	 	10/2/17	 	10/1/18	 	(416)	
$100 million	 	1.81%	 	10/1/18	 	8/19/19	 	(373)	
$62.5 million	 	0.60%	 	10/1/15	 	10/3/16	 	(81)	
$62.5 million	 	1.14%	 	10/3/16	 	10/2/17	 	(203)	
$62.5 million	 	1.57%	 	10/2/17	 	10/1/18	 	(245)	
$62.5 million	 	1.79%	 	10/1/18	 	8/19/19	 	(221)	
$62.5 million	 	0.58%	 	10/1/15	 	10/3/16	 	(74)	
$62.5 million	 	1.14%	 	10/3/16	 	10/2/17	 	(201)	
$62.5 million	 	1.53%	 	10/2/17	 	10/1/18	 	(224)	
$62.5 million	 	1.76%	 	10/1/18	 	8/19/19	 	(210)	
	 		 		 		 	 	
	 		 		 		 	$(4,261)	
	 		 		 		 	 	
9. Contract Liability
Contract liability represents the fair value of the below market contracts at the date of acquisition of the Company. The contract liability is being amortized into revenue on the straight-line basis over the remaining term of the contracts at acquisition date, which ranged from 6 months to 6 years. The contract liability will become fully amortized in 2017.
10. Commitments and Contingencies
In accordance with a Company agreement when cash and cash equivalents, excluding distributable proceeds, as defined by the agreement, exceeds $500,000 at the end of each calendar quarter, the Company will subsequently declare a distribution and distribute such excess cash and cash equivalents, as defined by the agreement, as long as the distribution would not violate any debt covenants.
The Company has certain non-cancellable land leases expiring through February 2051.
 
24

Buffalo Parent Gulf Coast Terminals LLC
Notes to Consolidated Financial Statements
(Information as of June 30, 2017 and for the
Six Months Ended June 30, 2017 and 2016 are Unaudited)
 
The minimum future lease payments under the leases as of December 31, 2016 are as follows (in thousands) :

Year Ending December 31,	  	 	 	
2017	  	$	1,183	 	
2018	  	 	1,183	 	
2019	  	 	1,358	 	
2020	  	 	1,533	 	
2021	  	 	1,533	 	
Thereafter	  	 	39,693	 	
	  	 	 	 	
	  	$	46,483	 	
	  	 	 	 	
Rent expense for the years ended December 31, 2016, 2015 and 2014 totaled $1,069,000, $1,034,000 and $1,029,000, respectively.
From time to time, the Company may be subject to various lawsuits and claims, none of which, in the opinion of management, will have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
11. Subsequent Events
Subsequent to December 31, 2016, the Company received a $20 million contribution from its members.
Management of the Company performed an evaluation of subsequent events through April 11, 2017, which is the date the audited consolidated financial statements were available to be issued. In preparation of the condensed consolidated financial statements for the six months ended June 30, 2017 and 2016, management has evaluated subsequent events for the unaudited interim condensed consolidated financial statements presented through August 31, 2017.
On June 6, 2017, the Company and its members entered into a definitive agreement to sell 100% of the Company’s outstanding ownership interest to a publicly-traded company. The transaction closed on July 17, 2017, at which time the Company became a wholly-owned subsidiary of the publically-traded company.
On July 6, 2017 the Company entered into a ground lease for an initial term of five years which can be canceled after three years. The rent for the initial three years is $1 million per yea  r.
 
25

Exhibit 99.3
SemGroup Corporation
Unaudited Pro Forma Combined Condensed Financial Statements
On July 17, 2017, SemGroup Corporation (“SemGroup”) completed the acquisition of Buffalo Parent Gulf Coast Terminals LLC (“BPGCT”), which owns and operates HFOTCO LLC doing business as Houston Fuel Oil Terminal Company (“HFOTCO”), for a purchase price paid, or to be paid, in two payments. The first payment made on July 17, 2017, consisted of $301 million in cash (subject to customary adjustments for working capital, net indebtedness and capital expenditures), funded from our revolving credit facility, issuance of approximately 12.4 million shares of our Class A common stock and the assumption of existing HFOTCO net debt of approximately $761 million. The second payment requires us to pay the sellers $600 million in cash if paid on December 31, 2018 (the “Second Payment”). If paid prior to December 31, 2018, the amount payable will be discounted by 5% per annum. If not paid by December 31, 2018, the amount payable increases to $680 million and is due by December 31, 2019, or earlier if requested by the sellers.
The accompanying unaudited pro forma combined condensed financial statements of SemGroup have been prepared in accordance with Article 11 of Regulation S-X. The accompanying unaudited pro forma combined condensed balance sheet at June 30, 2017, reflects the acquisition as if it had occurred on that date. The accompanying unaudited pro forma combined condensed statements of operations for the six months ended June 30, 2017 and 2016 and the year ended December 31, 2016, reflect the acquisition as if it had occurred on January 1, 2016. The terms “we”, “our”, “us”, and similar language used in these unaudited pro forma combined condensed financial statements refer to SemGroup and its subsidiaries.
These unaudited pro forma combined condensed financial statements have been derived from our historical financial statements, which are included in our quarterly report on Form 10-Q for the quarter ended June 30, 2017 and our annual report on Form 10-K for the year ended December 31, 2016, and the historical financial statements of BPGCT, which are included elsewhere in this current report on Form 8-K/A. These unaudited pro forma combined condensed financial statements should be read in conjunction with our and BPGCT historical financial statements and related notes thereto.
These unaudited pro forma combined condensed financial statements are provided for illustrative purposes only and do not purport to represent what our actual results of operations would have been if the acquisition had occurred on the dates assumed, nor are they necessarily indicative of our future operating results. However, the pro forma adjustments shown in these unaudited pro forma combined condensed financial statements reflect estimates and assumptions that we believe to be reasonable.
 
1

SEMGROUP CORPORATION
Unaudited Pro Forma Combined Condensed Balance Sheet
June 30, 2017
(in thousands)

 	  	Historical	 	 	Pro Forma	 	
 	  	SemGroup	 	 	BPGCT	 	 	Adjustments	 	 	 	 	  	Combined	 	
ASSETS	  				 				 				 				  				
Current assets:	  				 				 				 				  				
Cash and cash equivalents	  	$	56,535	 	 	$	3,829	 	 	$	(246	) 	 	 	(a)	 	  	$	60,118	 	
Accounts receivable, net	  	 	381,345	 	 	 	10,743	 	 	 	285	 	 	 	(a)	 	  	 	392,373	 	
Receivable from affiliates	  	 	8,650	 	 	 	—  	 	 	 	—  	 	 				  	 	8,650	 	
Inventories	  	 	80,446	 	 	 	—  	 	 	 	—  	 	 				  	 	80,446	 	
Other current assets	  	 	16,150	 	 	 	2,133	 	 	 	106	 	 	 	(a)	 	  	 	18,389	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Total current assets	  	 	543,126	 	 	 	16,705	 	 	 	145	 	 				  	 	559,976	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Property, plant and equipment, net	  	 	1,948,787	 	 	 	613,513	 	 	 	713,520	 	 	 	(b)	 	  	 	3,275,820	 	
Equity method investments	  	 	430,514	 	 	 	—  	 	 	 	—  	 	 				  	 	430,514	 	
Goodwill	  	 	34,802	 	 	 	907,700	 	 	 	(634,497	) 	 	 	(c)	 	  	 	308,005	 	
Other intangible assets, net	  	 	145,639	 	 	 	19,837	 	 	 	266,163	 	 	 	(d)	 	  	 	431,639	 	
Net investment in direct financing lease	  	 	—  	 	 	 	67,825	 	 	 	(6,305	) 	 	 	(e)	 	  	 	61,520	 	
Other noncurrent assets	  	 	63,350	 	 	 	5,353	 	 	 	(853	) 	 	 	(f)	 	  	 	67,850	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Total assets	  	$	3,166,218	 	 	$	1,630,933	 	 	$	338,173	 	 				  	$	5,135,324	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
LIABILITIES AND OWNERS’ EQUITY	  				 				 				 				  				
Current liabilities:	  				 				 				 				  				
Accounts payable	  	$	326,810	 	 	$	8,306	 	 	$	(7,700	) 	 	 	(a)	 	  	$	327,416	 	
Payable to affiliates	  	 	3,508	 	 	 	—  	 	 	 	—  	 	 				  	 	3,508	 	
Accrued liabilities	  	 	113,783	 	 	 	7,205	 	 	 	(165	) 	 	 	(a)	 	  	 	120,823	 	
Deferred revenue	  	 	9,425	 	 	 	117	 	 	 	61	 	 	 	(a)	 	  	 	9,603	 	
Other current liabilities	  	 	1,920	 	 	 	—  	 	 	 	—  	 	 				  	 	1,920	 	
Current portion of long-term debt	  	 	28	 	 	 	5,500	 	 	 	—  	 	 				  	 	5,528	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Total current liabilities	  	 	455,474	 	 	 	21,128	 	 	 	(7,804	) 	 				  	 	468,798	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Long-term debt, net	  	 	1,215,244	 	 	 	744,998	 	 	 	549,934	 	 	 	(g1)	 	  	 	2,826,501	 	
	  				 				 	 	300,823	 	 	 	(g2)	 	  				
	  				 				 	 	15,502	 	 	 	(g3)	 	  				
Deferred income taxes	  	 	63,323	 	 	 	—  	 	 	 	—  	 	 				  	 	63,323	 	
Other noncurrent liabilities	  	 	26,778	 	 	 	12,805	 	 	 	1,379	 	 	 	(h)	 	  	 	40,962	 	
Commitments and contingencies	  				 				 				 				  				
SemGroup owners’ equity:	  				 				 				 				  				
Preferred stock, $0.01 par value	  	 	—  	 	 	 	—  	 	 	 	—  	 	 				  	 	—  	 	
Common stock, $0.01 par value	  	 	661	 	 	 	—  	 	 	 	124	 	 	 	(i)	 	  	 	785	 	
Additional paid-in capital	  	 	1,505,941	 	 	 	—  	 	 	 	330,217	 	 	 	(i)	 	  	 	1,836,158	 	
Treasury stock, at cost	  	 	(7,824	) 	 	 	—  	 	 	 	—  	 	 				  	 	(7,824	) 	
Accumulated deficit	  	 	(34,450	) 	 	 	—  	 	 	 	—  	 	 				  	 	(34,450	) 	
Accumulated other comprehensive loss	  	 	(58,929	) 	 	 	(6,976	) 	 	 	6,976	 	 	 	(i)	 	  	 	(58,929	) 	
Members’ Capital	  	 	—  	 	 	 	858,978	 	 	 	(858,978	) 	 	 	(i)	 	  	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Total owners’ equity	  	 	1,405,399	 	 	 	852,002	 	 	 	(521,661	) 	 				  	 	1,735,740	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				  	 	 	 	
Total liabilities and owners’ equity	  	$	3,166,218	 	 	$	1,630,933	 	 	$	338,173	 	 				  	$	5,135,324	 	

2

SEMGROUP CORPORATION
Unaudited Pro Forma Combined Condensed Statement of Operations
Six Months Ended June 30, 2017
(in thousands, except per share amounts)

 	  	Historical	 	  	Pro Forma	 	
 	  	SemGroup	 	 	BPGCT	 	  	Adjustments	 	 	 	 	 	Combined	 	
Revenues:	  				 				  				 				 				
Product	  	$	741,367	 	 	$	—  	 	  	$	—  	 	 				 	$	741,367	 	
Service	  	 	156,680	 	 	 	71,016	 	  	 	—  	 	 				 	 	227,696	 	
Lease	  	 	—  	 	 	 	6,391	 	  	 	—  	 	 				 	 	6,391	 	
Other	  	 	31,142	 	 	 	1,913	 	  	 	—  	 	 				 	 	33,055	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Total revenues	  	 	929,189	 	 	 	79,320	 	  	 	—  	 	 				 	 	1,008,509	 	
Expenses:	  				 				  				 				 				
Costs of products sold, exclusive of depreciation and amortization shown below	  	 	689,105	 	 	 	—  	 	  	 	—  	 	 				 	 	689,105	 	
Operating	  	 	125,429	 	 	 	16,419	 	  	 	—  	 	 				 	 	141,848	 	
General and administrative	  	 	48,396	 	 	 	7,509	 	  	 	(5,453	) 	 	 	(n	) 	 	 	50,452	 	
Depreciation and amortization	  	 	50,201	 	 	 	13,359	 	  	 	23,236	 	 	 	(j	) 	 	 	86,796	 	
Loss on disposal or impairment, net	  	 	2,176	 	 	 	—  	 	  	 	—  	 	 				 	 	2,176	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Total expenses	  	 	915,307	 	 	 	37,287	 	  	 	17,783	 	 				 	 	970,377	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Earnings from equity method investments	  	 	34,844	 	 	 	—  	 	  	 	—  	 	 				 	 	34,844	 	
Operating income	  	 	48,726	 	 	 	42,033	 	  	 	(17,783	) 	 				 	 	72,976	 	
Other expenses (income), net:	  				 				  				 				 				
Interest expense	  	 	27,344	 	 	 	14,216	 	  	 	30,270	 	 	 	(k	) 	 	 	71,830	 	
Loss on early extinguishment of debt	  	 	19,930	 	 	 	—  	 	  	 	—  	 	 				 	 	19,930	 	
Foreign currency transaction gain	  	 	(1,011	) 	 	 	—  	 	  	 	—  	 	 				 	 	(1,011	) 	
Other expense (income), net	  	 	(591	) 	 	 	23	 	  	 	—  	 	 				 	 	(568	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Total other expenses, net	  	 	45,672	 	 	 	14,239	 	  	 	30,270	 	 				 	 	90,181	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Income (loss) from continuing operations before income taxes	  	 	3,054	 	 	 	27,794	 	  	 	(48,053	) 	 				 	 	(17,205	) 	
Income tax expense (benefit)	  	 	3,720	 	 	 	318	 	  	 	(7,638	) 	 	 	(l)	 	 	 	(3,600	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Net income (loss)	  	$	(666	) 	 	$	27,476	 	  	$	(40,415	) 	 				 	$	(13,605	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				 	 	 	 	
Net loss attributable to SemGroup per common share:	  				 				  				 				 				
Basic	  	$	(0.01	) 	 				  				 				 	$	(0.17	) 	
Diluted	  	$	(0.01	) 	 				  				 				 	$	(0.17	) 	
Weighted average common shares outstanding:	  				 				  				 				 				
Basic	  	 	65,717	 	 				  	 	12,384	 	 	 	(m	) 	 	 	78,101	 	
Diluted	  	 	65,717	 	 				  	 	12,384	 	 	 	(m	) 	 	 	78,101	 	
 
3

SEMGROUP CORPORATION
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 2016
(in thousands, except per share amounts)

 	  	Historical	 	  	Pro Forma	 	
 	  	SemGroup	 	 	BPGCT	 	  	Adjustments	 	 	 	 	  	Combined	 	
Revenues:	  				 				  				 				  				
Product	  	$	1,009,409	 	 	$	—  	 	  	$	—  	 	 				  	$	1,009,409	 	
Service	  	 	265,030	 	 	 	142,647	 	  	 	—  	 	 				  	 	407,677	 	
Lease	  	 	—  	 	 	 	12,825	 	  	 	—  	 	 				  	 	12,825	 	
Other	  	 	57,725	 	 	 	3,506	 	  	 	—  	 	 				  	 	61,231	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total revenues	  	 	1,332,164	 	 	 	158,978	 	  	 	—  	 	 				  	 	1,491,142	 	
Expenses:	  				 				  				 				  				
Costs of products sold, exclusive of depreciation and amortization shown below	  	 	873,431	 	 	 	—  	 	  	 	—  	 	 				  	 	873,431	 	
Operating	  	 	212,099	 	 	 	31,589	 	  	 	—  	 	 				  	 	243,688	 	
General and administrative	  	 	83,908	 	 	 	13,373	 	  	 	—  	 	 				  	 	97,281	 	
Depreciation and amortization	  	 	98,804	 	 	 	29,352	 	  	 	49,638	 	 	 	(j)	 	  	 	177,794	 	
Loss on disposal or impairment, net	  	 	16,048	 	 	 	—  	 	  	 	—  	 	 				  	 	16,048	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total expenses	  	 	1,284,290	 	 	 	74,314	 	  	 	49,638	 	 				  	 	1,408,242	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Earnings from equity method investments	  	 	73,757	 	 	 	—  	 	  	 	—  	 	 				  	 	73,757	 	
Loss on issuance of common units by equity method investee	  	 	(41	) 	 	 	—  	 	  	 	—  	 	 				  	 	(41	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Operating income	  	 	121,590	 	 	 	84,664	 	  	 	(49,638	) 	 				  	 	156,616	 	
Other expenses (income), net:	  				 				  				 				  				
Interest expense	  	 	62,650	 	 	 	31,787	 	  	 	60,540	 	 	 	(k)	 	  	 	154,977	 	
Foreign currency transaction loss	  	 	4,759	 	 	 	—  	 	  	 	—  	 	 				  	 	4,759	 	
Loss on sale or impairment of equity method investment	  	 	30,644	 	 	 	—  	 	  	 	—  	 	 				  	 	30,644	 	
Other expense (income), net	  	 	(994	) 	 	 	51	 	  	 	—  	 	 				  	 	(943	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total other expenses, net	  	 	97,059	 	 	 	31,838	 	  	 	60,540	 	 				  	 	189,437	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Income (loss) from continuing operations before income taxes	  	 	24,531	 	 	 	52,826	 	  	 	(110,178	) 	 				  	 	(32,821	) 	
Income tax expense (benefit)	  	 	11,268	 	 	 	572	 	  	 	(21,622	) 	 	 	(l)	 	  	 	(9,782	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Income (loss) from continuing operations	  	 	13,263	 	 	 	52,254	 	  	 	(88,556	) 	 				  	 	(23,039	) 	
Loss from discontinued operations, net of income taxes	  	 	(1	) 	 	 	—  	 	  	 	—  	 	 				  	 	(1	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net income (loss)	  	 	13,262	 	 	 	52,254	 	  	 	(88,556	) 	 				  	 	(23,040	) 	
Less: net income attributable to noncontrolling interests	  	 	11,167	 	 	 	—  	 	  	 	—  	 	 				  	 	11,167	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net income (loss) attributable to SemGroup	  	$	2,095	 	 	$	52,254	 	  	$	(88,556	) 	 				  	$	(34,207	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net income (loss) attributable to SemGroup per common share:	  				 				  				 				  				
Basic	  	$	0.04	 	 				  				 				  	$	(0.53	) 	
Diluted	  	$	0.04	 	 				  				 				  	$	(0.53	) 	
Weighted average common shares outstanding:	  				 				  				 				  				
Basic	  	 	51,889	 	 				  	 	12,384	 	 	 	(m)	 	  	 	64,273	 	
Diluted	  	 	52,281	 	 				  	 	12,384	 	 	 	(m)	 	  	 	64,665	 	
 
4

SEMGROUP CORPORATION
Unaudited Pro Forma Combined Condensed Statement of Operations
Six Months Ended June 30, 2016
(in thousands, except per share amounts)

 	  	Historical	 	  	Pro Forma	 	
 	  	SemGroup	 	 	BPGCT	 	  	Adjustments	 	 	 	 	  	Combined	 	
Revenues:	  				 				  				 				  				
Product	  	$	447,022	 	 	$	—  	 	  	$	—  	 	 				  	$	447,022	 	
Service	  	 	126,273	 	 	 	72,143	 	  	 	—  	 	 				  	 	198,416	 	
Lease	  	 	—  	 	 	 	6,449	 	  	 	—  	 	 				  	 	6,449	 	
Other	  	 	28,933	 	 	 	2,101	 	  	 	—  	 	 				  	 	31,034	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total revenues	  	 	602,228	 	 	 	80,693	 	  	 	—  	 	 				  	 	682,921	 	
Expenses:	  				 				  				 				  				
Costs of products sold, exclusive of depreciation and amortization shown below	  	 	373,789	 	 	 	—  	 	  	 	—  	 	 				  	 	373,789	 	
Operating	  	 	104,899	 	 	 	14,789	 	  	 	—  	 	 				  	 	119,688	 	
General and administrative	  	 	41,835	 	 	 	7,207	 	  	 	—  	 	 				  	 	49,042	 	
Depreciation and amortization	  	 	49,106	 	 	 	14,927	 	  	 	27,468	 	 	 	(j)	 	  	 	91,501	 	
Loss on disposal or impairment, net	  	 	14,992	 	 	 	—  	 	  	 	—  	 	 				  	 	14,992	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total expenses	  	 	584,621	 	 	 	36,923	 	  	 	27,468	 	 				  	 	649,012	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Earnings from equity method investments	  	 	40,149	 	 	 	—  	 	  	 	—  	 	 				  	 	40,149	 	
Loss on issuance of common units by equity method investee	  	 	(41	) 	 	 	—  	 	  	 	—  	 	 				  	 	(41	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Operating income	  	 	57,715	 	 	 	43,770	 	  	 	(27,468	) 	 				  	 	74,017	 	
Other expenses (income), net:	  				 				  				 				  				
Interest expense	  	 	35,588	 	 	 	20,525	 	  	 	30,270	 	 	 	(k)	 	  	 	86,383	 	
Foreign currency transaction loss	  	 	3,012	 	 	 	—  	 	  	 	—  	 	 				  	 	3,012	 	
Loss on sale or impairment of equity method investment	  	 	30,644	 	 	 	—  	 	  	 	—  	 	 				  	 	30,644	 	
Other expense (income), net	  	 	(678	) 	 	 	26	 	  	 	—  	 	 				  	 	(652	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Total other expenses, net	  	 	68,566	 	 	 	20,551	 	  	 	30,270	 	 				  	 	119,387	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Income (loss) from continuing operations before income taxes	  	 	(10,851	) 	 	 	23,219	 	  	 	(57,738	) 	 				  	 	(45,370	) 	
Income tax expense (benefit)	  	 	(16,749	) 	 	 	248	 	  	 	(13,014	) 	 	 	(l)	 	  	 	(29,515	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Income (loss) from continuing operations	  	 	5,898	 	 	 	22,971	 	  	 	(44,724	) 	 				  	 	(15,855	) 	
Loss from discontinued operations, net of income taxes	  	 	(4	) 	 	 	—  	 	  	 	—  	 	 				  	 	(4	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net income (loss)	  	 	5,894	 	 	 	22,971	 	  	 	(44,724	) 	 				  	 	(15,859	) 	
Less: net income attributable to noncontrolling interests	  	 	10,942	 	 	 	—  	 	  	 	—  	 	 				  	 	10,942	 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net income (loss) attributable to SemGroup	  	$	(5,048	) 	 	$	22,971	 	  	$	(44,724	) 	 				  	$	(26,801	) 	
	  	 	 	 	 	 	 	 	  	 	 	 	 				  	 	 	 	
Net loss attributable to SemGroup per common share:	  				 				  				 				  				
Basic	  	$	(0.11	) 	 				  				 				  	$	(0.47	) 	
Diluted	  	$	(0.11	) 	 				  				 				  	$	(0.47	) 	
Weighted average common shares outstanding:	  				 				  				 				  				
Basic	  	 	44,553	 	 				  	 	12,384	 	 	 	(m)	 	  	 	56,937	 	
Diluted	  	 	44,553	 	 				  	 	12,384	 	 	 	(m)	 	  	 	56,937	 	
 
5

SEMGROUP CORPORATION
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
 
1.	Basis of presentation	
The historical consolidated financial information of the Company has been adjusted in the accompanying unaudited pro forma combined condensed financial information to give effect to pro forma events that are (i) directly attributable to the acquisition of BPGCT, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined condensed statements of operations, are expected to have a continuing impact on the results of operations.
The unaudited pro forma combined condensed financial information was prepared using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.
 
2.	Pro forma adjustments	
These adjustments reflect the estimated consideration paid or to be paid by SemGroup to acquire BPGCT. The following table represents the preliminary purchase price allocation to the assets acquired and liabilities assumed from BPGCT. This preliminary purchase price allocation has been used to prepare pro forma adjustments in the unaudited pro forma combined condensed financial statements. The final purchase price allocation may differ from these estimates and could differ materially from the preliminary allocation described below (in thousands):

Preliminary consideration	  				
Cash	  	$	300,823	 	
Common shares	  	 	330,341	 	
Second Payment	  	 	549,934	 	
Liabilities assumed	  				
Fair value of long-term debt	  	 	766,000	 	
Pension obligation	  	 	10,610	 	
	  	 	 	 	
Total preliminary consideration	  	$	1,957,708	 	
	  	 	 	 	
Allocation to assets acquired	  				
Cash acquired	  	$	3,583	 	
Net working capital	  	 	6,369	 	
Property, plant and equipment	  	 	1,327,033	 	
Net investment in direct financing lease	  	 	61,520	 	
Finite-lived intangible assets	  				
Customer relationships	  	 	255,000	 	
Customer contract	  	 	1,000	 	
Non-compete agreement	  	 	30,000	 	
Goodwill	  	 	273,203	 	
	  	 	 	 	
Total fair value of assets acquired	  	$	1,957,708	 	
	  	 	 	 	
(a) Adjustments to reflect the preliminary fair values of working capital items at the acquisition date. Final working capital adjustments will be made within 60 days of close.
(b) Adjustment to reflect the fair value of property, plant and equipment acquired.
(c) Adjustment to remove historical goodwill of BPGCT and record $273.2 million of goodwill reflected in the purchase price allocation.
 
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SEMGROUP CORPORATION
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
 
(d) Adjustment to remove historical intangible assets of BPGCT and record $286.0 million of intangibles reflected in the purchase price allocation.
(e) Adjustment to reflect the net investment in the direct financing lease at fair value on acquisition date.
(f) Adjustment to write-off historical BPGCT debt issuance costs associated with the HFOTCO revolving credit facility.
(g1) Adjustment to reflect the fair value of the Second Payment on the acquisition date.
(g2) Adjustment to reflect SemGroup’s revolver borrowing for cash consideration paid of $300.8 million
(g3) Adjustment to record assumed debt at fair value on acquisition date.
(h) Adjustments to record pension liability and interest rate swap liability at acquisition date fair values of $10.6 million and $3.5 million, respectively, and to write-off historical BPGCT contract liability of $0.2 million.
(i) Adjustments to write-off historical BPGCT equity including accumulated other comprehensive loss and record SemGroup par value and additional paid-in capital related to the acquisition.
(j) Adjustments to reflect increased depreciation and amortization expense due to increase in property, plant and equipment to fair value and the recognition of finite-lived intangible assets.
Property, plant and equipment is depreciated over periods of up to 25 years on a straight-line basis. Pro forma depreciation expense is based on the fair value of the assets at the acquisition date and is based on the expected useful life based on asset class and company policy. Adjustments to historical depreciation were made to bring total depreciation of BPGCT assets up to the following amounts (in thousands):

Six Months ended June 30, 2017	 	  	Year ended December 31, 2016	 	  	Six Months ended June 30, 2016	 	
$	24,028	 	  	$	48,057	 	  	$	24,028	 	
Finite-lived intangibles are amortized over their estimated useful lives. The non-compete agreement is effective for two years from the acquisition date and will be amortized straight-line over the two-year period. Customer relationships are being amortized over 20 years on an accelerated basis which matches the incremental cash flow models used to value the intangible assets and in consideration of a historical customer attrition rate of 5%. Customer contracts are being amortized over three years on a straight-line basis. Adjustments to amortization expense were made to remove historical amortization expense and reflect the following amounts of amortization expense related to the finite-lived intangibles recognized in the acquisition (in thousands):

Six Months ended June 30, 2017	 	  	Year ended December 31, 2016	 	  	Six Months ended June 30, 2016	 	
$	12,567	 	  	$	30,933	 	  	$	18,367	 	
 
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SEMGROUP CORPORATION
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
 
Amortization of intangible assets for the five years following the acquisition is expected to be (in thousands):

 	  	Year ended
December 31, 2017	 	  	Year ended
December 31, 2018	 	  	Year ended
December 31, 2019	 	  	Year ended
December 31, 2020	 	  	Year ended
December 31, 2021	 	
Non-compete agreement	  	$	7,500	 	  	$	15,000	 	  	$	7,500	 	  	$	—  	 	  	$	—  	 	
Customer relationships	  	 	10,700	 	  	 	9,800	 	  	 	22,000	 	  	 	21,500	 	  	 	21,800	 	
Customer contracts	  	 	167	 	  	 	333	 	  	 	333	 	  	 	167	 	  	 	—  	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	18,367	 	  	$	25,133	 	  	$	29,833	 	  	$	21,667	 	  	$	21,800	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
(k) Adjustments to recognize interest expense related to the Second Payment which was discounted at 8% and SemGroup’s $300.8 million acquisition payment made from a borrowing on our revolving credit facility at 5.5%.
(l) Adjustments to recognize additional income tax expense based on SemGroup’s historical blended statutory rate of 37.7%. BPGCT is a pass-through entity for income tax purposes and therefore it’s historical financial statements only reflect Texas margins tax.
(m) Adjustment to reflect the 12.4 million common shares issued as consideration for the acquisition as if the acquisition had occurred on January 1, 2016. Common shares issued were valued based on the acquisition date market price of $26.68 per share.
(n) Adjustment to remove acquisition costs included in the historical financial statements of SemGroup.
 
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